All about ISAs
What is an ISA?
ISA stands for 'Individual Savings Account'. It's a kind of account that allows you to save money without having to pay any further tax on your returns.
The Government introduced ISAs in order to encourage people to save. Each UK resident over the age of 18 has an allowance of £7,200* each year that they can save within ISAs.
When you are planning your finances, if, for example, you have for example £10,000 to save, it makes sense to consider putting the first £7,200* of that into ISAs.
What's the difference between a Stocks & Shares ISA and a Cash ISA?
Stocks & Shares ISAs invest in unit trust funds across a range of 'assets' such as shares, bonds and property. Where as Cash ISAs are cash deposit savings offering variable or fixed rates of interest.
Stocks & Shares ISA unit trust give you a varying return because they reflect the performance of the underlying assets. They generally offer a greater potential return than cash savings over the long-term, yet also come with more ups and downs along the way.
Remember, these types of investment are different to cash savings. While cash savings are secure, Stocks & Shares ISA investments will fluctuate in value; unless you choose a guaranteed investment product for your ISA neither the value of the investment nor any income from it is guaranteed and so you may get back less than you paid in.
When you choose a Cash ISA, you need to consider the rate of return and the access to your money offered by the product.
With a Stocks & Shares ISA, you will need to choose one or more Unit Trust fund to invest in and take account of their different investment objectives and risk profiles. There are literally thousands of funds offered by hundreds of providers to choose from in the UK. Making the right choice can be difficult and so most people tend to seek help from a financial advisor to ensure they choose funds that reflect how much risk they want to take with their investment.
The Co-operative offers both types of ISA; Cash ISA from The Co-operative Bank as well as a range of Unit Trust funds in a Stocks & Shares ISA from The Co-operative Investments. Your choice(s) will depend on your attitude to risk, your savings goals, your preferences and the mix of funds you need to achieve a balanced portfolio.
Find out what The Co-operative offer.
How much can you invest in ISAs?
You can invest a total of £7,200* each tax year through a Stocks & Shares ISA. Of the £7,200*, you can save up to £3,600* through a Cash ISA. If you choose to save in both a Stocks & Shares ISA as well as a Cash ISA, then you can use the same or different ISA manager for each of these. However you can't invest in two different Stocks & Shares ISA's in the same year.
* If you were born on or before 5th April 1960, increased ISA limits apply from 6th October 2009. You can invest up to £5,100 each tax year in a Cash ISA and your overall annual ISA investment allowance is £10,200. These higher limits will apply to all eligible ISA investors with effect from 6th April 2010.
